Zhang Chengjia has supplied sewing machines to textile shops in southern China for the past 20 years. But as the government pushes ahead with plans to convert his neighbourhood into a high-tech hub, he fears his livelihood is at risk.
“I don’t say it lightly . . . but I’ll have to change professions,” he said over the din of his two young daughters playing in the cramped office of his machinery shop. “What’s high tech about clothing?”
Zhang’s shop is one of thousands of small businesses in Kanglu, a so-called urban village in China’s manufacturing heartland. There are more than 4,400 urban villages across eight of China’s largest cities, housing more than 55mn residents, according to a state media estimate in 2023.
These settlements were once a source of cheap accommodation and employment for the migrants who moved from rural areas to cities, mostly on the south and east coasts, and fuelled China’s economic boom.
Now, authorities hope urban villages can once again provide the engine to re-energise economic growth. They plan to convert them into high-tech hubs for “new quality productive forces”, which they hope will also stimulate flagging housing demand.
In its first executive meeting of 2025, the State Council, China’s cabinet, highlighted the renovation of urban villages as a priority and “an important means to expand domestic demand”. In November, the government said it would increase support for the redevelopment of urban villages to cover those in nearly 300 cities across the country, up from a previous list of 35.
“Upgrading urban villages is part of Beijing’s effort to facilitate industrial migration to inland cities and [create] newly developed industrial clusters,” said Chi Lo, Asia-Pacific senior market strategist at BNP Paribas Asset Management, adding that the move was linked to Beijing’s efforts to promote high-tech industry.
“This policy . . . commands top policy priority in the long-term development of the country into a global tech giant,” he said.
Upgrading urban villages could help boost property sales, authorities hope, as homeowners could use compensation from the redevelopment of their homes and businesses to buy new properties.
If the owners of all 1mn urban housing units set for renovations were compensated monetarily, the upgrades could help generate about 100mn sq metres of property sales, said Lillian Li, senior analyst at Moody’s Investors Service. “That could help to support the overall new house sales.”
For the urban villages with low-end factories — many of which now face competition from cheaper manufacturing hubs overseas — the hope is that high-tech enterprises will boost productivity and allay competitive pressure.
City planners in Shenzhen, the megacity that pioneered China’s manufacturing special economic zones, intend to convert a cluster of urban villages into part of an industrial park for eyewear and fashion.
Further afield, state media has praised projects in Wuhan, central China, where an urban village was transformed into a science park hosting research into graphene radio aerials and high-tech gas detectors. Another, in Chongqing, will be integrated into a “digital economy industrial park”.
In Kanglu, authorities hope to renovate 110 hectares of land, reducing the population from 130,000 to 70,000, and invite high-tech enterprises to a new “international fashion innovation and vitality zone”.
But with many higher-end fashion industry jobs focused on branding and design, the plan is likely to reduce the number of workers needed for physical labour, said Fan Di, a professor at the Hong Kong Polytechnic University and an expert on supply chains.
“Whether the local labour can adapt to the higher-value operations . . . whether they have the expertise on branding, on product development, that is really a question mark,” he said.
For now, the local government has initiated renovations on at least two patches of land totalling 3.6 hectares in Kanglu. The flat, dusty plots — which will eventually host new homes and industrial space — mark a stark contrast with the noisy, small-scale garment factories surrounding them.
Many residents are sceptical of the plan, which coincides with a slowdown in global demand and rising competition from lower-cost hubs in south-east Asia.
“There is no industry here any more,” said one elderly factory owner next to barriers that enclose the newly demolished site.
For Hou Tianwu, a 39-year-old manager at a clothing and crafts factory, marching further up the value chain is a necessary, if difficult, transition.
“There may be a big difference between the current clothing [industry] and the industrial park. Customers’ requirements are getting higher and higher, and the quality is getting better and better,” he said.
“Now we’re in this big reshuffle stage, and some people will be weeded out.”
Back in his shop, Zhang, the sewing machine supplier, said he now spent more time dealing with shuttered factories returning his products than on new business.
“My warehouse is full and I have no place to put them,” he said. “The whole industry is experiencing a downturn.”